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The Rich Default More Often On Mortgages; Where Is The Outrage From The Right-Wing?

News came this morning about the rate at which people in different demographics default on their mortgages. There has been a couple of years’ worth of right-wing rage directed at people who took loans out and ended up not being able to make their payments. I won’t hold my breath waiting for them to direct that rage at the folks who can’t (won’t) pay most often: the super-rich.

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Over 14% of million dollar-plus loans are delinquent (and the number is rising).

Only 8% of the rest of loans are delinquent (and the number, which hasn’t been much higher is shrinking).

Guess which demographic is the recipient of the faux rage of the lunatic right-wing. It’s poor people who are lazy and who want to take advantage of the rest of us, according to them. Observe the immoral mission right-wingers took upon themselves to take down the agency that helped some of the non-rich figure out how to buy a house (ACORN). That agency had its government funding revoked. Will they demand that rich people get their wealth (which was transferred from the lower- and middle-class by Con economic policies) revoked? Fat chance.

Why are there people who go out of their way to protect the interests of millionaires and billionaires? Because some people think they’ll actually be one of those millionaires one day, despite the overwhelming evidence that they’ll very likely never achieve that status.

I think that your spin on the data probably doesn’t quite capture what was going on.

At the height of the housing boom in California, a lot of very modest middle class homes did cost $1,000,000+ and people were taking out outrageous mortgages relative to their incomes (via 50 year loan terms, interest only loans, negative amortization loans, choices of variable rates over fixed rates, etc.), because they felt that middle class people ought to own their own homes. The trouble is that they didn’t have incomes necessary to support $1,000,000 mortgages in a sustainable way. Even with crazy loans, many people were spending more than 50% of their incomes on mortgage payments and only got loans due to non-existent underwriting since the assumption was that foreclosure could make the lender whole in the event of a default with real estate prices rising so rapidly, so ability to pay didn’t matter much. Alas, the housing values for these houses, which were worth far less than $1,000,000 by any measure of economic fundamentals, didn’t last either.

Also, since home mortgages in California were non-recourse (i.e. you can’t be sued if the house is worth less than the loan), the risk of overextending yourself to buy an overpriced home for a rational middle class family was a lot lower than it was in Colorado where that isn’t the case.

The difference between people with $1,000,000 homes and less valuable homes is more a product of the cost of a house in different regions during the boom than it was a product of class differences.

I’ll agree that I didn’t examine every part of this story in excruciating detail; but I stand by my words (gotta love the word spin…). The thing to do, of course, would be to do a detailed geographic and demographic analysis of every home that was defaulted since the beginning of 2007. What percentage of homes in California over a $1,000,000 purchase price ended up in default? What percentage of homes in California under a $1,000,000 purchase price ended up in default? What about every other state?

Is there a large number of $1,000,000 homes in California? I’m sure there is. But not every $1,000,000 home in America is in California; not every $1,000,000 home in America is subject to the same kind of market characteristics that exist in California. Do similar conditions exist across other real estate markets? To some extent, that is also probably a good assumption. But I doubt all of the $1,000,000+ homes in default were due to middle-class families taking out mortgages they couldn’t afford. Was this the case in a majority of defaults? I would have to see some hard data to back that up.

I think my overall point is very valid: Republican Teabaggers have been too willing to lay the blame for the mortgage default crisis at the feet of lazy, stupid people who took out mortgages they couldn’t afford. Not when tremendously expensive homes are defaulting at higher rate, which tells me that, to some degree, upper income folks can absorb the hits more easily than lower income folks. Not when the Teabaggers constantly, persistently and overwhelmingly choose to defend billionaires and millionaires and blame too many of society’s ills on people who aren’t in the upper 1%.